It seems incredibly unfair that the very businesses that need to get paid on time are often the ones that aren’t. Small businesses often find themselves in a cash flow quandary because they have been let down by a late paying client.
Trust plays a big part in all business and personally we think it is one of the nice things about dealing with small businesses – the very foundations of which are often built on a network of trusted clients and contacts.
However, what happens when a client goes dark? What can you do? First thing’s first, set off on the straight and narrow from the outset.
- Credit Check Clients
It’s not something that you would necessarily think of doing but forewarned is forearmed as they say. Your accountant will be able to help you with tracking the financial reputation of new clients by getting them credit checked. If they don’t check out, walk away.
- Pro Forma Invoices
You can also send new clients pro forma invoices before you complete any work for then and ensure they either send a purchase order back to you based on this or some form of agreement in writing, it doesn’t have to be too formal just an email agreeing to the terms of your pro forma is sufficient. This will then form a legally binding agreement and protects both parties.
- Clear Terms
You will often find that the larger the company the more flagrant their payment terms, typically some are as long as 90 days. As a small business owner this lead time will play havoc with your cash flow and could set you back on production of orders for other clients. If possible keep payment terms to 30 days.
- Bill Early Chase Often
Don’t be too shy to send your invoice early, either as soon as the work is completed or at a set time during the month every month so that the client knows when to expect your bill. Use tools like our Accountancy Packages to easily produce your invoices on time. You can send a payment reminder a week before payment is due or if payment does not arrive on the set day chase it up immediately, do not put it in your to do file. Chase up by telephone so as not to give your supplier the opportunity to file your email under follow-up.
- Make Payment Easy
The more hoops a client has to jump through to pay your invoice the more they will put it off. Provide the swiftest ways possible for them to pay. By using cloud based Accountancy Packages such as the ones offered by FD Business you will ensure that all of the correct bank details are on your invoice and you can also see when it has been paid without logging into your bank account and scrolling through hundreds of transactions.
- Don’t be afraid to say ‘No’
As a small business owner it feel like madness to turn business down. But, if you have any doubts or a poor credit check has been returned, politely decline the business this time. It is simply not worth your time and effort to engage business with a partner who is a bad payer.
Just because you are a small business don’t give your clients any reason to forget about you and therefore your invoices – foster great working relationships with the good clients you have and always take the time to thank them for paying promptly. Some companies charge late fees and interest on outstanding invoices, we would suggest that this is a last resort and probably only necessary for particularly stubborn payers.
If you have any other tips for ensuring that the clients you work with don’t leave you waiting, please share them below in the comments.
FD Business can assist with all accounting and finance issues that affect the day to day running of your business. We have experience of all types and sizes of businesses. If you would like a free no obligation consultation to see how we can help your business succeed please contact us.
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